The convertibles market has seen some innovative issues recently and Goldman Sachs has been at the center of the most interesting ones. The Allianz deal was the first to offer event risk protection and as a result, according to Jim Ziperski, head of convertibles for Goldman Sachs in London, it sparked a very positive reaction.
"The market has been clamouring for this for years and Allianz was the first to put this protection in their note," says Ziperski. "It was a hallmark transaction from the standpoint of an issuer recognizing a need and desire on one part of the market, actually acting on it and getting paid for it."
Another piece of innovation involved Swiss Re. "It was a triple play bond, the first of its kind," says Ziperski. "It was really an exchangeable issued by Swiss Re which could be exchangeable to any one of three stocks at the option of the holder."
Ziperski says investors were prepared to pay a much higher premium and were willing to accept a much lower coupon on the deal. "So Swiss Re got both higher premium and lower costs and it was done because they were sitting on a portfolio, as a number of insurance companies do, of shares which are not perfectly correlated with each other," he says.